Lynas Rare Earth Production in 2015 Exceeds Expectations

Jan. 28, 2016

Increased production 52% year-over-year

On January 27, 2016 Australian rare earth miner Lynas Corporation (“Lynas”) announced business results for the fourth quarter of 2015. The company produced 10,916 tonnes of REO and REO equivalent in the 2015 calendar year – 18% more than we were anticipating and a 52% increase year-over-year.

With some exceptions, Lynas has increased production from its Mt. Weld mine in Australia and processing plant in Malaysia steadily since the second quarter of 2013 while driving down production costs in the face of steadily falling rare earth prices.

Near-breakeven result in Q4 despite record-low prices

Despite rare earth prices reaching multi-year-lows in late-2015 Lynas managed to eke out a near-breakeven fourth quarter result – an encouraging outcome at a time when around 90% of China’s producers are operating at a loss. The company’s all-in cash cost of production in the fourth quarter was $16.08 per kilogram of TREO produced versus cash revenues of $15.89 per kilogram of TREO sold.

Emerging success story for production outside China

Compared to U.S. counterpart, Molycorp, which filed for bankruptcy protection in June 2015, Lynas is emerging as a success story for rare earth production outside of China, surviving an unprecedented downturn in rare earth prices since 2012 and stiff competition from Chinese incumbents.

We expect the company to report higher costs through the first half of 2016 as it starts up an additional production line but will reap the benefits of greater economies of scale, and thus lower operating costs, through the second half of 2016.

 

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